The Real Culprits Also Lead to Strategic Crises Management

During the NAFTA debate Ross Perot made famous the phrase “the sucking sound you hear will be jobs going into Mexico, China and the Subcontinent.”  The 21^st Century modification is “the sucking sound of dollars flowing to Iraq.”  By the time we end the full scale occupation of Iraq, it will have absorbed directly and indirectly $5 trillion which does not include the opportunity costs of denying the same amount to America’s needs.

During his first four years President Obama will have the opportunity to face the spending crises with an equally critical set of solutions.  In the absence of scaling back current subsidies for non-renewable energy producers and ethanol not much can be done for fuel and food prices.  Simply put, the President will have a two front challenge on domestic economics at the most basic level: Leading Americans to a less expensive way to get to work, and at the same time keep their jobs to feed their families.

There are no mega bucks laying around to tax at high marginal rates that will do us any good in the short run given the enormity of the dollar need to not only sustain this economy but to ameliorate systemic damages created by the massive transfer of funds to Iraq/Afghanistan, OPEC, and other oil producers. Something has to drop out of the expenditure stream.  First, and very near term, is funding the U.S. occupation of Iraq. 

Phase out of Iraq  $100-$300 Billion/yr

In the short run, the next 12-36 months, relief is likely where reductions in expenditures for phasing out of Iraq are not then transferred, dollar for dollar, to Afghanistan or some other Defense Department “priority”. The current Administration wants a long term presence in Iraq as “guardians of the peace”, and to “ensure access to oil and gas”. The Iraqi’s may, after Regional Elections this Fall, scrap plans to even negotiate with the new President “this quite” approach to occupation.  A much harder line will be announced if the Iranian backed Muqtadur al Sadr gains a significant majority of seats in the Iraqi Parliament.  Nonetheless, when the Iraqis tell us to leave we will have to leave.  They could invoke “Persona non Grata”, forcing the U.S. out under accepted International Law. It is more likely that there will be a negotiated phase down allowing the next President to submit a Budget that reflects funding for domestic priorities from a portion of the funds that would have been allocated to the full scale occupation of Iraq. 

Since occupying Iraq and energy costs are the major culprits in squeezing to the bare bones, the quality of life for Middle Class Americans, real outlays in the form of block grants to the states should be budgeted for the revised, soon to be current FY09 and FY10 budgets. These outlays would be directed to infrastructure rehabilitation and maintenance.  An infusion of new funding, for capital and labor expansion, ameliorates some of the economic impact of past negligence of our infrastructure. Nationally, new jobs conservatively estimated at 3 to 4 million over two years would save billions in unemployment subsidies, welfare and other transfers to states and local areas that rely on federal relief for distressed areas.

Deploy Renewable Technologies--- $300-$500 Billion/over 4 yrs

Renewable sources of energy are the answer. Furthermore, if history is our guide, we can see that every industrial and technological revolution in history inspired an economic boom. Building an infrastructure for next-generation energies would generate millions of jobs around the world, and revolutionize the automobile industry as well as other industries. Researching, developing, and introducing new transportation technologies that are cleaner, safer, and less environmentally destructive should be, our top national security and economic priority.  However, to exclude ocean kinetics is a monumental mistake. T. Boone Pickens and others have a stellar idea to use wind and solar to free up natural gas thereby replacing imported oil.  Oil imports account for almost one-third of the total U.S. deficit and, hence, are a major contributor to unemployment. The Department of Energy estimates that each $1 billion of trade deficit costs America 27,000 jobs.

As prices for traditional energy climb renewables become more viable.  However, even at pre-oil price escalation (2003), the kwh cost of wave energy was equal to or below the kwh cost of coal and natural gas.

For instance global commercial transportation costs under our current oil dependence could be reduced by trillions of dollars with a combination of renewable electricity, natural gas, and domestic oil. Particularly, in the U.S., where approximately 65% of all goods are delivered by truck, light and heavy, and rail expenditures could be reduced by 60% to 75% for fuel costs alone. The cost of securing our access to Middle East oil - deploying U.S. forces in the Persian Gulf, patrolling its water and supplying military assistance to Middle East countries - is estimated at $750 billion per year, which adds additional dimes to each gallon of gasoline we purchase.  Just reducing that amount and allocating it to deployment of renewables, saves conservatively, $100 billion over four years.  According to the National Defense Council Foundation, the economic penalties of America's oil dependence total $297.2 to $304.9 billion annually. If reflected at the gasoline pump, these “hidden costs” would raise the price of a gallon of gasoline to over $10.28. A fill-up would be over $205.